April 14, 2017

Revised CHOICE Act may be in the offing

While the latest draft of House legislation overhauling the federal financial regulatory framework would reportedly keep the membership of the NCUA Board at three, rather than five as NASCUS has advocated, association President and CEO Lucy Ito noted that this measure is just in its beginning stages and much can change. This week, House Financial Services Committee Chairman Jeb Hensarling (R-Texas) began circulating a revised “Financial CHOICE Act” bill among committee members for their thoughts (CHOICE stands for “Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs”). In a previous version of the bill, released late last summer, Hensarling included a provision expanding the board membership to five – which NASCUS supported (and stated so in a letter to the chairman early this year).

“There is a long way to go in the legislative process, and our view that bringing more voices to the NCUA table through more members is shared by others in the credit union system – we will, with them, continue to advocate this position,” Ito said. “We also continue to support designating one member of the NCUA Board for someone with experience as a state credit union regulator.”

The latest CHOICE legislation (which has not yet been introduced or circulated publicly) does reportedly include provisions that would remove the CFPB’s rulemaking authority under Unfair, Deceptive or Abusive Acts or Practices (UDAAP), the Dodd-Frank Act’s mandate to the CFPB to ensure that all consumer financial products and services are fair; transition CFPB to an enforcement agency, losing its supervision authority, and; repeal the Durbin amendment regulating fees on interchange. The legislation may be introduced by month’s end.

TRUMP VOICES INTEREST IN STREAMLINING, OR ELIMINATING, DODD-FRANK

Major streamlining – and perhaps outright elimination – of the Dodd-Frank regulatory reform legislation is under consideration by the Trump administration, President Donald Trump said in a meeting this week with leaders of various companies, and top members of his cabinet. In the meeting, the president said that bankers in the room will be “very happy because we’re doing a major streamlining and, perhaps, elimination (of the Dodd-Frank laws), and replacing it with something else.” The Dodd-Frank Wall Street Reform and Consumer Protection Act was passed into law in 2010 as a response to the financial crisis of 2007-08. The legislation included a number of additional regulatory requirements for financial institutions, as well as establishing the Consumer Financial Protection Bureau. The president said that streamlining would be “the minimum.” “But we’re doing a major elimination of the horrendous Dodd-Frank regulations, keeping some obviously, but getting rid of many,” he added, according to remarks by the president posted on the White House website. In other comments, the president said that the “banks will be able to lend again.” “So many people come to see me, I see them all the time — small businesses — they’re unable to borrow from banks,” Trump said. “They never had a problem five, six, seven, ten years ago. They had great bankers. They had great relationships. Now they can’t borrow. And we’re going to let the banks loan them money, and they can build their businesses.”

LETTERS FOCUS ON COMPLIANCE RISK AND ITS EVALUATION

A supervisory letter on evaluating compliance risk, with updated compliance risk indicators, has been posted on the NCUA website; the letter – addressed to all NCUA field staff -- was delivered to all federally insured credit unions via a “Letter to Credit Unions” from the agency late last month. The letter to credit unions (LTCU 17-CU-02), titled “Risk-Focused Examinations and Compliance Risk,” explains that the supervisory guidance was developed to provide agency examiners with direction about the updated list of compliance risk indicators that are part of NCUA’s Risk-Focused Examination (RFE) Program. The updated list of indicators, the letter explains, does not impose any new or higher supervisory expectations for credit unions, and took effect March 31.

The letter notes that March 31 was also the effective date for the revised FFIEC Uniform Interagency Consumer Compliance Rating System, the principles of which, NCUA states, the agency has incorporated into the Compliance Risk Indicators (CRI). The agency noted in the letter that the supervisory evaluation of compliance is ordinarily conducted as part of NCUA’s risk-focused examinations of credit unions, not as a separate examination.

The Supervisory Letter states that the updated CRI list outlined in the letter builds upon the current set of indicators and “provides additional guidance for field staff in assigning the compliance risk rating – one of the existing seven risk categories in the Risk-Focused Examination program,” the letter states. “The update reflects transformations in technology, business models, and members’ banking habits since the list of Compliance Risk Indicators were originally developed in 2002.” The letter states that the update results “in a more comprehensive, integrated and transparent framework in evaluating a credit union’s ability to manage its risk of violations and non-compliance with applicable laws and regulations.”

DELAY FOR CFPB PRE-PAID RULE ENSURES TIME TO PREPARE

A six-month delay of the effective date of the CFPB’s final rule on pre-paid accounts, to April 1, 2018, is supported by the state credit union system because it will ensure credit unions and other industry participants have the time to prepare for the rule, NASCUS has written to the bureau in its official comment letter. NASCUS pointed out that the bureau’s final rule regarding Prepaid Accounts under the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z) has raised concerns about the lack of sufficient time to implement the changes to policies and procedures that are needed in order to comply with the current effective date of the final rule (now Oct. 1).

“NASCUS believes it is important to strike a balance between enforcing reasonable regulation while not stifling institutions’ ability to provide the products and services that are beneficial and desired by consumers,” wrote NASCUS Vice President and Legislative and Regulatory Counsel Nichole Seabron. “State regulators are often required to balance ensuring the safety and soundness of the state banking system with the need to not quell or stifle innovation and delivery of products/services,” she added. “We believe that extending the time institutions will have to implement regulatory compliance changes in this instance strikes the right balance between ensuring proper consumer protections are in place and making certain that institutions have adequate time to respond to new regulatory requirements.”

PROPOSAL WOULD CLARIFY HMDA DATA COLLECTION, REPORT

A proposal clarifying the information financial institutions are required to collect and report about their mortgage lending – helping them, in turn, comply with Home Mortgage Disclosure Act (HMDA) rules – was issued today by the CFPB. The 150-page proposal, CFPB said in a statement, contains a number of clarifications, technical corrections and minor changes to the HMDA regulations. Those include clarifying certain key terms – such as “temporary financing” and automated underwriting system” – and establishing transition rules for reporting certain loans purchased by financial institutions. Other changes would facilitate reporting the census tract of a property, using a new geocoding tool the CFPB says it plans to provide online. CFPB said the proposal – issued for a 30-day comment period – resulted from public outreach and engagement which identified opportunities to clarify parts of its 2015 HMDA final rule. The agency was directed by the Dodd-Frank Wall Street Reform and Consumer Protection Act to update the HMDA regulation, which it did in 2015, to improve the quality and type of information reported by financial institutions. Most of those updated requirements take effect next year (2018).

CYBERSECURITY MEETING, JUST WEEKS AWAY, FEATURES HOST OF EXPERTS

More than 20 cybersecurity experts– with backgrounds on everything from deterring cyber crime to managing public relations related to a cyber crisis – are set to speak at the NASCUS/CUNA 2017 Cybersecurity Symposium, just about six weeks away, June 5-6, in San Diego. The Symposium -- now in its fourth year as a collaboration between NASCUS and CUNA – has established itself as the most comprehensive program in the credit union space dealing with cybersecurity issues. With more than 14 hours of presentations, dialog and discussion over two days, the event looks at cutting-edge techniques and best practices and procedures to protect organizations from the latest cyber threats and challenges. Sessions this year include: international trends; combating cyber-enabled financial crimes; incident response-forensic and crisis communication in breaches; 10 things that make a hacker’s job easy; understanding the vulnerabilities of the cloud; cyber risk rating an institution -- and more. The event will be held at the Westin Gaslamp Quarter Hotel, right next door to San Diego’s historic Gaslamp Quarter, with dining and entertainment just steps away. Hotel reservation cutoff is May 15.

A platform for allowing credit unions to easily shop for new digital services will be highlighted as the “Next Big Idea” portion of the program at the NASCUS 2017 State System Summit Aug. 29-Sept. 1 in San Diego. The digital services shopping center was the winner of the National Association of Credit Union Service Organizations’ (NACUSO) “Next Big Idea” competition held this week at the organization’s annual meeting in Orlando. According to its developer, Constellation Digital Partners, the platform is designed to allow credit unions to shop for and choose new functions in the digital marketplace, while ensuring security of transactions and providing access to the core processing system. The platform will be highlighted during a Thursday, Aug. 31 session of the Summit, which is the only national meeting focusing exclusively on the state credit union system. The event brings together credit union regulators and practitioners for mutual exchange and dialog to listen to ideas, share thoughts and look for solutions to the challenges and opportunities facing the state credit union system. Registration fee discounts for the Summit end on June 1.

BRIEFLY: NCUA schedules April meeting

After skipping a meeting in March (the first time in several years it has not held a monthly board gathering other than the usual August break), the NCUA Board has scheduled an April meeting Thursday to hear quarterly reports on the share insurance and corporate stabilization funds, and to consider how proposed changes to the Illinois state member business loan rule bring that rule in conformance with the agency rule.